Brown defends tax increase to business group contending it won’t be a burden to Californians

IRVINE, Calif. (AP) — Gov. Jerry Brown on Thursday defended his ballot proposal to raise taxes, arguing that Californians paid more in taxes in 2009 and 2010 than they would under his plan if it's approved by voters.

The Democratic governor told reporters after meeting with about 50 business leaders in Orange County that his temporary tax hikes are vital to stabilize the state's budget and provide sufficient funding for public schools.

He referred to previous temporary increases to the sales, income and vehicle taxes that expired last year, saying they were not a burden on Californians.

"Everyone here was paying twice the tax in 2009 and 2010, and most people I've talked to were not giving that particular burden a lot of thought," he said. "No business I know left town because of it."

The comments come as Brown took his campaign for a November ballot initiative on the road —first to Orange County, a Republican stronghold, and then to San Diego —a day after promoting the plan in his State of the State address.

Brown's budget seeks to close a $9.2 billion deficit with a roughly equal proportion of spending cuts and tax increases.

He aims to raise income taxes on individuals who make $250,000 a year or more and boost the state sales tax by half a cent. He also supports investments in long-term public works projects such as the $98 billion high-speed rail system and an upgrade to the state's water supply and delivery system.

His approach differs from that of many other governors, who are scaling back spending and downsizing government amid falling tax revenue. It also faced skepticism later in the day when Brown spoke to about 200 business and civic leaders in San Diego for 45 minutes before speaking with reporters and lingering to pose for photographs.

Some questioned how the more ambitious initiatives Brown supports would benefit them, including a $98 billion high-speed rail system that excludes San Diego in its initial phase. And when asked if he was holding schools hostage to his proposed tax increase, Brown said education is the largest piece of the state budget and that he had limited room to make spending cuts to prisons and social services.

"It's not a threat. It's just a statement of how the budget works and how it comes together," he said.

Brown has warned that if Californians reject his tax plan in November, he will call for $5.4 billion in immediate spending cuts that will hit public schools the hardest. Those cuts could reduce the school year by three weeks, after it already dropped from 180 days to 175.

Ruben Barrales, president of the San Diego Regional Chamber of Commerce, said the tax increase was "a tough sell" to businesses that are cutting costs to make ends meet but that Brown could win support by making substantial progress on other business priorities.

Barrales said those included overhauling public employee pensions, increasing water reliability, promoting renewable energy and fighting for local control of schools. The governor addressed all those topics in his speech.

"One has to follow the other," Barrales told reporters. "He's a smart man. He knows what he's doing. He's talking about those kinds of things because he wants to ultimately build support for his big initiative."

Brown has said his tax hike would generate $7 billion a year through 2017, but the nonpartisan Legislative Analyst's Office differs on the amount of revenue likely to come from the wealthy and estimates that Brown's plan would generate about $4.8 billion a year.

Brown said the tax increase would not amount to much in the context of the state's $2 trillion economy and insisted it "will help our schools and in no way will retard our business investment."

He also said he was getting widespread business support for the ballot proposal, which included campaign contributions.

Countering the Republicans' argument that tax cuts — rather than increases — are needed to promote economic growth, Brown noted the deep federal tax cuts enacted while George W. Bush was president.

"The Bush tax cuts did not prevent the greatest recession since the Great Depression," he said.

Orange County Business Council president Lucy Dunn said Brown made a compelling argument. She said the crowd at Thursday's round-table event, which was closed to reporters, was supportive. Her organization backed his attempt last year to extend the expired tax hikes but has yet to formally evaluate his latest plan, she said.

Brown's attempt to raise taxes last year was thwarted by Republicans, who argue that tax hikes will imperil a slowly improving economy that is beginning to generate higher tax revenue for the state. Republicans also say Brown and Democratic lawmakers, who hold the majority in the Legislature, should focus first on controlling state spending, reining in public pension costs and reforming the state's regulatory climate to give businesses a boost.

California Republican Party Chairman Tom Del Beccaro said the governor should focus on making California more competitive and that tax increases will do the opposite.

"If you're squeezing somebody's arm and it hurts already, telling them you're only going to temporarily squeeze it a lot harder isn't a solution to the problem," Del Beccaro told The Associated Press.

Fran Inman, senior vice president at Majestic Realty Co., said she was encouraged by the discussion in Irvine and recognized that tax hikes and budget cuts would both be necessary moving forward.

"I think it's pretty evident to all of us you can't make it on the back of one or the other," said Inman, who is a Republican. "There's no silver bullet."